Description

This documented is authored by Rama Krishna Vadlamudi, MUMBAI (vrk_100@yahoo.co.in). Unichem Laboratories Limited is a small-cap company with a market cap of Rs 950 crore. It is well-known for its steady growth providing value to its shareholders. The article analyses the company from an individual investor’s point of view. The company promoted by Dr PA Mody has been on BSE’s listed shares since 1962 without interruption. It has got a robust balance sheet with strong cash flows from operating activities, negligible debt, good dividend track record, and in the process adding value to investors in the last 10 years.

 The company is almost a zero-debt company with debt-equity ratio at 0.05 (2008-09)

 Being a zero-debt company practically, its interest cover ratio is more than 75

 The company has shown consistent progress in its sales and profitability for the past ten years or so (it’s always better to see a company’s progress over a period of ten years because we have to see how the company has performed during different cycles – peak and trough – of the economy)

 It has never incurred loss in the last ten years

 It has always shown positive cash flows from operating activities in the last ten years

 The dividend payout has always been more than 20 per cent in the last ten years – it being 24 per cent during the latest 2008-09

 For the past four financial years, the company has been paying a dividend of more than 100 per cent on its face value, that is, Rs 5 per share (It paid a dividend of Rs 8 per share, in fact, in 2008-09)

 The return on capital employed (ROCE) has been more than 25 per cent in the past ten years except in two years

 The return of net worth (RONW) has also been more than 25 per cent in the past ten years except in two years

 The company is known for its conservatism and steady growth with strong fundamentals

 Due to its low volumes of stock trading, the company has never been on the radar of FIIs, which is a blessing in disguise for small individual investors (the higher the participation of FIIs, the greater the volatility and chances of loss by small investors)